In business and accounting, an asset is
defined as a probable future economic benefit obtained or
controlled by a particular entity as a result of a past transaction
or event.

Asset characteristics

Assets have three essential
characteristics:

The probable future benefit involves a capacity,
singly or in combination with other assets, in the case of profit
oriented enterprises, to contribute directly or indirectly to
future net cash flows,
and, in the case of not-for-profit
organizations, to provide services;

The entity can control access to the benefit; and,

The transaction or event giving rise to the entity's right to,
or control of, the benefit has already occurred.

It is not necessary, in the financial
accounting sense of the term, for control of assets to the
benefit to be legally enforceable for a resource to be an asset,
provided the entity can control its use by other means.

It is important to understand that in an
accounting sense an asset is not the same as ownership. In
accounting, ownership is described by the term "equity," (see the
related term shareholders'
equity). Assets are equal to "equity" plus "liabilities."

Probably the most accepted accounting definition
of asset is the one used by the
International Accounting Standards Board . The following is a
quotation from the IFRS Framework: "An asset is a resource
controlled by the enterprise as a result of past events and from
which future economic benefits are expected to flow to the
enterprise."

Assets are formally controlled and managed within
larger organizations via the use of asset tracking tools. These
monitor the purchasing, upgrading, servicing, licensing, disposal
etc., of both physical and non-physical assets.

Classification of assets

Current assets

Current assets are cash and other assets
expected to be converted to cash, sold, or consumed either in a
year or in the operating cycle. These assets are continually turned
over in the course of a business during normal business activity.
There are 5 major items included into current assets:

Short-term investments — include securities bought and held for
sale in the near future to generate income on short-term price
differences (trading securities).

Receivables — usually reported as net of allowance for
uncollectible accounts.

Inventory —
trading these assets is a normal business of a company. The
inventory value reported on the balance
sheet is usually the historical cost or fair market value,
whichever is lower. This is known as the "lower of cost or market"
rule.

Prepaid expenses — these are expenses paid in cash and recorded
as assets before they are used or consumed (a common example is
insurance). See also adjusting
entries.

The phrase net current assets (also called
working
capital) is often used and refers to the total of current
assets less the total of current liabilities.

Long-term investments

Often referred to simply as
"investments". Long-term investments are to be held for many years
and are not intended to be disposed in the near future. This group
usually consists of four types of investments:

Investments in securities, such as bonds, common stock, or
long-term notes.

Investments in fixed assets not used in operations (e.g., land
held for sale).

Different forms of insurance may also be treated
as long term investments.

Fixed assets

Also referred to as PPE (property, plant, and
equipment), or tangible assets, these are purchased for continued
and long-term use in earning profit in a business. This group
includes land,
buildings, machinery, furniture, tools, and certain wasting
resources e.g., timberland and minerals. They are written off
against profits over
their anticipated life by charging depreciation expenses (with
exception of land). Accumulated depreciation is shown in the face
of the balance sheet or in the notes.

Intangible assets

Intangible assets lack physical substance and
usually are very hard to evaluate. They include patents, copyrights, franchises, goodwill, trademarks, trade names,
etc. These assets are (according to US GAAP) amortized to expense
over 5 to 40 years with the exception of goodwill.

Some assets such as websites are treated differently
in different countries and may fall under either tangible or
intangible assets.

Other assets

This section includes a high variety of
assets, most commonly:

Long-term prepaid expenses

Long-term receivables

Property held for sales

In a lot of cases this section is
too general and broad, because assets could be classified into four
above categories.